DirectCash Payments Inc. ("DirectCash" or the "Company") (TSX:DCI)
today announced consolidated financial results for the three and
nine months ended September 30, 2012.
Financial and Operational Highlights:
-- Increased the three month EBITDA 82% to $18.1 million and the nine month
EBITDA 34% to $38.2 million
-- Increased the three month Revenue 135% to $67.0 million and the nine
month Revenue 49% to $127.0 million
-- Business continues to generate solid financial results with Funds from
Operations payout ratio of 59%
-- Gained market share in the United Kingdom, becoming the 2nd largest non-
bank ATM deployer with 5,298 ATMs
-- Closed acquisition of Customers Limited in Australia and began
integration process
-- Syndicated and expanded the Company's credit facilities
-- Issued 2,800,000 new shares to the public at $23.35 per share for gross
proceeds of $65.4 million
-- Issued $125 million aggregate principle amount of 7-year senior
unsecured notes bearing interest at 8.125% per annum
-- Subsequent to the quarter, acquired 100% of the shares of New Zealand
ATM Services Limited
Management's Commentary
"We are pleased with our results in the third quarter which
incorporated our transformative acquisitions of Customers and
InfoCash. Our initial results have been very promising and we are
pleased with our ability to generate synergies in the business and
we look forward to driving shareholder value through the operation
of our businesses" said Jeffrey Smith, DirectCash's President and
Chief Executive Officer.
As expected in the early stages of the integration process
following the very significant Australian acquisition, SG&A and
operating costs incurred in Q3 2012 included non- recurring
expenditures. Personnel costs included approximately $1.0 million
in severance costs to streamline operations. This is expected to
result in annual cost savings of approximately $3.1 million. The
Company also internalized technician services during the quarter
which will be reflected in lower costs for the balance of the year.
Additionally, to address Australian ATM transaction processing
costs we recently successfully renegotiated the contract effecting
per transaction fee reductions of approximately 50%, representing
annual savings in excess of $1.5 million, and extending the term of
the contract.
DirectCash will continue to seek to increase efficiencies and to
pursue growth through additional accretive acquisitions as
opportunities arise. DirectCash's stable, contracted revenue stream
and dominant market positions will continue to provide consistent
cash dividends to DirectCash's Shareholders.
Summary financial and operating results for the three and nine
months ended September 30, 2012 are set forth below and complete
copies of the Company's Financial Statements and Management's
Discussion & Analysis ("MD&A") are available on SEDAR at
(www.sedar.com).
Three months ended Nine months ended
September 30 September
2012 2011 2012 2011
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Summary operating results
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Number of machines
Active ATM terminals(1) 19,423 7,848 19,423 7,848
Number of transactions
ATM transactions 27,929,616 9,013,934 47,732,637 25,998,143
Other transactions 4,386,524 4,947,649 13,584,552 14,419,444
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Summary financial results
(thousands, except for per
share amounts)
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Revenue 67,017 28,466 126,977 85,251
EBITDA(2) 18,095 9,931 38,246 28,634
EBITDA margin(3) 27.0% 34.9% 30.1% 33.6%
Net Income (Loss) (2,468) 4,380 4,656 11,774
Net Income (Loss)
attributable to common
shareholders (2,096) 4,380 5,028 11,774
Per share, basic (0.14) 0.32 0.35 0.86
Per share, diluted (0.14) 0.32 0.35 0.85
Funds from operations(3) 8,704 8,854 25,033 26,163
Funds from operations per
share, basic(3) 0.57 0.64 1.75 1.90
Funds from operations per
share, diluted(3) 0.56 0.64 1.74 1.89
Dividends declared 5,418 4,775 14,968 14,324
Dividends declared per
share(4) 0.35 0.35 1.04 1.04
Funds from operations payout
ratio(4) 62.2% 53.9% 59.8% 54.7%
Total assets 436,252 157,774 436,252 157,774
Total long-term debt 199,112 - 199,112 -
Common shares outstanding,
end of period 16,639 13,839 16,639 13,839
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1. DirectCash has included statistics only for sites that recoded a
transaction in the last calendar month of the period indicated.
2. An additional GAAP measure which is defined in the Additional GAAP
Measure section of this press release.
3. A non-GAAP measure which is defined in the Non-GAAP Measures section of
this press release.
4. See Dividends section of this press release.
Customers Limited Acquisition
On July 4, 2012 the Company successfully completed its
acquisition of Customers Limited ("Customers") (ASX: CUS), whereby
DirectCash acquired all of the outstanding shares of Customers for
$1.27 Australian dollars per diluted share in cash.
As a result of the acquisition of Customers, the largest
deployer of ATMs in Australia, a total of approximately 6,600 ATM
sites and related contracts were acquired by DirectCash in
Australia and New Zealand. The acquisition provides the opportunity
to grow the Customers ATM business platform in Australia and
capitalize on the less mature Australian market, where transactions
and gross profits per ATM are significantly greater than in the
mature Canadian ATM market.
On August 8, 2012 DirectCash issued $125 million aggregate
principal amount of seven year senior unsecured notes (the
"Notes"). The Notes are direct senior unsecured obligations ranking
pari passu with all other present and future senior unsecured
indebtedness of DirectCash and bear interest at 8.125 % per annum,
payable semi- annually in arrears. The net proceeds were used to
repay the bond bridge loan drawn in respect of the Customers
acquisition.
On August 9, 2012 DirectCash completed a private placement of
2,800,000 common shares of the Company for $23.35 per common share.
The net proceeds from the issue were used to repay the equity
bridge loan, drawn in respect of the Customers acquisition, with
the remainder of the proceeds added to working capital.
Outlook
DirectCash believes it is well positioned with a strong balance
sheet and a steady cash flow stream based on long term contracts.
DirectCash' focus for the balance of 2012 will be to integrate the
acquisitions of Customers and InfoCash, as well as to continue to
grow the business in a reasonable and sustainable manner by
maintaining current customer relationships and managing our cost
structures. In the ATM business, emphasis continues to be on the
streamlining of DirectCash's operations as well as continuing to
pursue quality accretive acquisitions and additional organic growth
within DirectCash's international operations. With the completion
of regulatory mandated security upgrade changes in Canada,
DirectCash will be positioned to refocus its efforts on growth
through quality accretive acquisitions and additional organic
growth.
As a result of the acquisition of Customers, the largest
deployer of ATMs in Australia, a total of approximately 6,600 ATM
sites and related contracts were acquired by DirectCash in
Australia and New Zealand. The acquisition provides the opportunity
to grow the Customers ATM business platform in Australia and
capitalize on the less mature Australian market, where transactions
and gross profits per ATM are significantly greater than in the
mature Canadian ATM market.
As a result of the acquisition of InfoCash, a total of
approximately 4,700 ATM sites and related contracts were acquired
by DirectCash in the United Kingdom. Since the acquisition,
DirectCash has grown organically, adding 598 ATMs for a total of
5,298 as at September 30, 2012. This growth positions DirectCash as
the second largest deployer of ATMs in the United Kingdom.
DirectCash's focus in this market moving forward is to continue to
grow the ATM business in Europe through quality accretive
acquisitions and organic growth.
In the prepaid products line of business DirectCash will strive
to increase diversification, both in terms of product offerings
such as MasterCard prepaid cards, bank accounts and related
financial services through DirectCash's strategic alliance with
DirectCash Bank, and in terms of the number of customers DirectCash
serves in order to reduce DirectCash's dependence on a small group
of large volume customers.
DirectCash will continue to organically grow the debit terminal
business via cross selling to existing customers and through the
pursuit of new customer relationships. Quality accretive
acquisitions will be pursued as opportunities arise.
At the time of acquisition by the Company, Customers held a
47.75% interest in New Zealand ATM Services Limited ("NZ ATM"),
which represented a control position. The results of NZ ATM have
been consolidated with the results of the Company.
On November 12, 2012 the founding shareholders of NZ ATM, NZ ATM
and DC Payments Pty Limited ("DC Payments") entered into a Deed of
Settlement and Release whereby the founding shareholders sold to DC
Payments their 52.25% shareholdings in NZ ATM plus shareholder
loans for NZ$1.2 million (approximately $1.0 million) effective
immediately. As part of this transaction the Put and Call
arrangement between the founding shareholders and DC Payments has
been eliminated for no consideration.
On November 9, 2012, DirectCash in addition to The CashStore
Financial Services Inc. ("CashStore") and DC Bank were named in a
class action lawsuit as it relates to payday loans and related fees
in the province of Manitoba. DirectCash is indemnified by CashStore
and in turn has indemnified DC Bank. DirectCash has retained
counsel on this matter.
Additional GAAP Measure:
DirectCash has presented earnings before interest, taxes,
depreciation and amortization ("EBITDA") as a subtotal in its
condensed consolidated interim statement of operations. EBITDA is
an important measure utilized by management in assessing the
financial performance of the Company relative to its operating
plans and budgets. It is also the primary measurement utilized by
the holders of our long term debt. The Company has presented EBITDA
prior to the deduction for acquisition-related expenses. These
expenses relate to the acquisitions of Customers and InfoCash,
which resulted in the expansion of the Company into two new primary
geographical segments and are non-recurring expenditures. The
Company has also presented EBITDA prior to unrealized foreign
exchange gains and losses which is consistent with the Company's
financial covenants. The Company's EBITDA may differ from similar
computations as reported by other issuers and, accordingly, may not
be comparable to EBITDA as reported by such issuers. EBITDA is
reconciled to net income (loss) in the Company's MD&A for the
three and nine months ended September 30, 2012 and 2011.
Non-GAAP Measures:
There are a number of financial calculations that are not
defined performance measurements under GAAP but which DirectCash
believes are useful and accepted performance measurements utilized
by the investing public in assessing the overall financial
performance of the Company and to compare cash flows between
entities.
EBITDA margin: EBITDA margin means EBITDA expressed as a
percentage of total revenue.
Funds from operations and funds from operations per share:
DirectCash calculates funds from operations as net income (loss)
plus or minus depreciation, amortization, deferred income taxes and
unrealized foreign exchange losses (gains) and after provision for
productive capital maintenance capital expenditures (see discussion
below). Readers are cautioned that funds from operations cannot be
assured to continue at equivalent levels in the future.
DirectCash's funds from operations and funds from operations per
share may differ from similar computations as reported by other
issuers and, accordingly, may not be comparable to funds from
operations and funds from operations per share as reported by such
issuers. Funds from operations is reconciled to net income (loss)
in the Company's MD&A for the three and nine months ended
September 30, 2012 and 2011.
Funds from operations payout ratio: Funds from operations payout
ratio means dividends declared expressed as a percentage of total
funds from operations.
Productive capital maintenance expenditures: DirectCash
differentiates capital expenditures between growth and productive
capital maintenance ("Maintenance Capital"). There is no such
distinction under GAAP. However, DirectCash believes it is
important to differentiate between them as maintenance capital
expenditures represent an adjustment to funds from operations while
growth capital does not.
Maintenance capital expenditures are defined as expenditures
required to service and maintain DirectCash's existing productive
capacity, while growth capital is expended to increase DirectCash's
productive capacity by adding additional sources of revenue not
currently in existence. Current measures of productive capacity
that DirectCash utilizes include ATMs and debit terminals under
contract (see "Operational Highlights"), software and hardware
upgrades to existing infrastructure, ATM and debit terminal
equipment upgrades necessary to meet changing regulatory
requirements, contract extension incentives, and fleet vehicle
purchases and upgrades. Examples of growth capital expenditures
include the acquisition of a competitor's assets, the cost of an
ATM in a new location, or technology costs related to new sources
of revenue.
Readers are cautioned that the Company's computation of
productive maintenance capital expenditure may differ from similar
computations as reported by other issuers and, accordingly, may not
be comparable to productive maintenance capital expenditures as
reported by such issuers.
Dividends:
Beginning January 1, 2011 (starting with the January 31, 2011
record date), shareholders of DirectCash have received monthly
payments in the form of dividends, with the initial monthly
dividend set at $0.115 per Common Share. All dividends are eligible
dividends for the purpose of the Income Tax Act (Canada) unless
indicated otherwise. Dividends are funded by the generation of
funds from operations of the business. As of January 1, 2011, all
of the income generated at the level of the various subsidiaries of
the Company is taxed by applicable government authorities with the
remaining after-tax funds either being retained by the subsidiary
or distributed up to the Company where it can be made available for
payment of dividends by DirectCash. Continued future distribution
of dividends (and the amount of any dividends) is subject to
DirectCash's Board of Directors approval. DirectCash's Board of
Directors is not obligated to distribute all net available cash as
dividends to shareholders.
Forward Looking Information:
This MD&A offers our assessment of DirectCash's future plans
and operations and contains "forward-looking information" relating
to future events as defined under applicable Canadian securities
legislation. DirectCash's actual results or performance could
differ materially from those expressed in, or implied by, this
forward-looking information. DirectCash can give no assurance that
any of the events anticipated will transpire or occur or, if any of
them do, what benefits or costs we will derive from them.
Forward-looking statements are subject to numerous risks and
uncertainties, certain of which are beyond DirectCash's ability to
control, including but not limited to general economic conditions,
interest rates, foreign currency rates, consumer spending,
borrowing trends and regulatory changes to name a few. Additional
risk and uncertainties are described in DirectCash's Annual
information Form for the year ended December 31, 2011 which is
available at www.SEDAR.com and in the "Key Business Risks" section
of the Company's MD&A for the three and nine months ended
September 30, 2012.
The forward-looking information contained in this MD&A is
expressly qualified by this cautionary statement. Certain
statements that contain words such as "could", "believe",
"expects", "expected", "will", "intends", "projects",
"anticipates", "estimates", "continues" or similar words relating
to matters that are not historical facts constitute
"forward-looking information" within the meaning of applicable
Canadian securities legislation.
Forward-looking information and statements contained in this
MD&A include statements related to DirectCash's projected
growth in international operations in the Americas, Australasia and
Europe in the ATM business, projected growth in the prepaid and
debit terminal business, ability to complete accretive acquisitions
on a go forward basis, expansion of DirectCash's merchant base
through new and innovative products, impact of acquisitions in
United Kingdom and Australia including realizing on expected
synergies, ability to continue to acquire long-term recurring
services contracts and negotiate renewals thereof in advance of
their expiry, ability to maintain current customer relationships,
ability to obtain improved supplier terms and manage cost
structures internationally, ability to increase our product
offerings in Australia and the United Kingdom and expected increase
in capital expenditures due to regulatory mandated security upgrade
changes.
Readers are cautioned that our expectations, estimates,
projections and assumptions used in the preparation of such
information, although considered reasonable at the time of
preparation, may prove to be imprecise and, as such, undue reliance
should not be placed on forward-looking statements. With respect to
forward-looking statements contained within this MD&A,
expectations are based on our current strategic plan and management
forecasts, the historical financial performance and operational
data of acquired entities, our existing contracts schedule,
forecast and budget and projections of increased capital
expenditure requirements based on our view of the mandated
regulatory security upgrade requirements and age of capital assets
currently in use by DirectCash.
The assumptions and estimates relating to the forward-looking
information referred to above are updated quarterly and except as
required by law, we do not undertake to update any other
forward-looking information.
Additional information about DirectCash is available on SEDAR
(www.sedar.com) or DirectCash's website at www.directcash.net.
Contacts: DirectCash Payments Inc. Brian B. Kathol Chief
Financial Officer (403) 387-2103 (403) 451-3003
(FAX)bkathol@directcash.net DirectCash Payments Inc. Amanda J.
Gallacher Investor Relations (403) 387-2158 (403) 451-3058
(FAX)investorrelations@directcash.net www.directcash.net